Legal title refers to the ownership of the underlying assets. In order for a securitisation transaction to be successful, the special purpose vehicle (SPV) must have legal title to the underlying assets. This means that the SPV must have the legal right to sell, transfer, and encumber the underlying assets.
There are a number of ways to perfect legal title to the underlying assets in a securitisation transaction. One way is to transfer the underlying assets to the SPV by way of a deed of assignment. Another way is to create a security interest in the underlying assets in favour of the SPV.
The application of legal title in securitisation is to ensure that the investors in the securitisation transaction have a valid security interest in the underlying assets. This is because the investors will only be repaid if the underlying assets are sold or transferred. If the SPV does not have legal title to the underlying assets, then the investors will not have a valid security interest and they may not be repaid.
Here are some of the factors to consider when perfecting legal title to the underlying assets in a securitisation transaction:
- The type of underlying assets: The type of underlying assets will determine the method that is used to perfect legal title. For example, if the underlying assets are receivables, then the method of perfection will be different than if the underlying assets are real property.
- The jurisdiction in which the underlying assets are located: The jurisdiction in which the underlying assets are located will also determine the method that is used to perfect legal title. For example, the method of perfection in Australia will be different than the method of perfection in the United States.
- The laws governing the underlying assets: The laws governing the underlying assets will also determine the method that is used to perfect legal title. For example, the method of perfection under the Uniform Commercial Code (UCC) will be different than the method of perfection under the Torrens system.